In this, the ringgit is not alone. Most currencies in the world have fallen against the US dollar this year — and the ringgit is far from the worst-performing, faring better than the euro, pound sterling, South Korean won, Taiwanese dollar and Japanese yen. Very few currencies have appreciated against the greenback, and the best-performing is, ironically, the sanctions-hit Russian ruble, which we highlighted last week.
Much has been written about the recent slump of the ringgit against the US dollar. It is a legitimate worry. The weak ringgit will worsen domestic inflationary pressures by increasing the cost of imported food, energy, goods and services — and further raise the cost of living.
In truth, there is little most countries can do in the current environment, where the US Federal Reserve is aggressively raising interest rates. The ringgit also hit an all-time low against the Singapore dollar this month due, in part, to the relatively more rapid monetary policy tightening by the Monetary Authority of Singapore. For many though, matching the Fed’s rate hikes in lockstep would risk damaging fragile post-pandemic economic recoveries. But slower rate hikes mean wider interest rate differentials and a weaker domestic currency.
